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Vonage: Not a Telecommunications Service

Today, the 8th Circuit Court of Appeals ruled in favor of Web-calling provider Vonage in a landmark case. In Vonage Holdings Corp vs. the Nebraska Public Service Commission, the court determined that Vonage and other Voice over Internet Protocol (VOIP) providers whose services can be used nomadically won?? have to contribute to the state?? universal service fund (USF), because these companies provide an ??nformation service?rather than a “telecommunications” service. Traditional carriers are required to contribute to the fund, used to provide schools with access to telecom services.

The decision could have long-ranging implications for national policy that governs USF charges. “This decision is a major victory for the entire VoIP industry who have long fought the states and the FCC on this issue,” notes Jessica Zufolo, senior policy director at Medley Advisors. “As a result of this opinion, several states with state USF funds will no longer have legal justification for assessing intrastate USF contributions on VoIP providers.” She adds, “This case throws a monkey wrench into the FCC’s ongoing process on what kind of access charge regime should apply to VoIP traffic.”

As more such cases pop up in different states, the FCC will have to, for starters, come up with a new definition of telecommunications services. “….the ultimate question as to whether VoIP service is a telecommunications service or an information service remains unanswered by the FCC,” according to a legal alert from law firm Sutherland Asbill & Brennan. Then will come an even harder part: Determining just how much to charge Vonage and its ilk. After all, according to today’s decision, Vonage is not a telecommunications service provider, and should not be charged at all.